The “Missing Middle” in Residential Construction

In a recent posting, the National Association of Home Builders (NAHB) has brought to light the “missing middle” in the residential construction sector. The missing middle includes the development of medium-density housing, which includes townhouses, duplexes, and other small multifamily unit properties.

The NAHB reports that while in recent quarters townhouse construction has moved incrementally higher, the multifamily portion of the missing middle—apartments in 2-to-4-unit properties—has continued to lag behind. In 2021, there were only 12,000 such residential starts recorded. This is unchanged from 2020 and occurred during a period of time when most segments in the markets expanded.

The NAHB notes that as a share of all multifamily production, 2-to-4-unit development is only 2.5% of the total. In contrast, from 2000 to 2010, such home construction made up a little less than 11% of total multifamily construction. The NAHB concludes that the construction of the missing middle has clearly lagged during the post-Great Recession period.